Dreamworks Ditches Universal For Disney

In a surprising move, Universal Pictures announced on Friday that it no longer plans to distribute DreamWorks movies says The Hollywood Reporter.

Since Dreamworks split from Paramount on its own, the general thinking was that the former was cementing a deal with Spielberg’s old Amblin Entertainment home Universal Pictures to distribute their movies.

Instead Spielberg and Stacey Snider are in advanced talks with the Walt Disney Company about a distribution deal.

Universal explained its dropping out of negotiations: “Universal Pictures has ended discussions with DreamWorks for a distribution agreement. Over the past several weeks DreamWorks has demanded material changes to previously agreed upon terms. It is clear that DreamWorks’ needs and Universal’s business interests are no longer in alignment. We wish them luck in their pursuit of funding and distribution of their future endeavors.”

The basic setup according to Nikki Finke is that Dreamworks and Universal were all set for a straight distribution deal late last year. Then the world financial crisis hit which has delayed a good portion of the bank financing Dreamworks needs to complete its big Bollywood deal with Reliance Big Entertainment.

As a result Dreamworks apparently went to Universal with demands for an investment of $250 million as well as the existing distribution setup. Universal understandably balked at the suggestion and negotiations have been dragging on for weeks, not helped by Dreamworks being unable to secure a deal with HBO to include in the package.

During this time, Dreamworks began secret simultaneous talks with Disney to see if it could offer a better deal. With its smaller slate, marketing machine, and Starz Network rollout – the studio is understandably a better fit for Dreamworks with its addition of 3-6 films per year. On Thursday Universal became aware of the Disney/Dreamworks talks and all sorts of memos seeking clarification of the current negotiations were being sent. Finally this morning Universal gave up and left the negotiating table.

A formal statement of the Disney and Dreamworks deal is expected to be announced next week.